Earnings management and audit quality:stakeholders’ perceptions

This paper examines the perceptions of Libyan Commercial Banks’ (LCBs) stakeholders regarding the role of the external auditor in relation to earnings management (EM). A total of 28 semi-structured interviews were carried out with a range of LCB stakeholders comprising preparers of financial statements, users, regulators and academics. A questionnaire survey of stakeholders which yielded 102 Responses (response rate 53%) was also carried out. A variety of views were held which varied to some extent according to stakeholder group. A widely held perception amongst interviewees was that the auditor has the ability to detect EM practices but may not be able to prevent it. However questionnaire respondents were, in aggregate, more confident of the auditor’s ability to deter EM due to the influence of the audit report. The paper provides insights into stakeholders’ perceptions of the quality of bank audits. The findings are of particular relevance to regulators, and specifically, the Central Bank of Libya. Perceptions of audit quality raise questions about its guidance and regulations especially in connection with audit firm rotation. Perceptions of audit quality, and therefore, of the credibility of financial statements should be of interest to all stakeholders. The importance of the banking sector for society has been amply demonstrated in recent years. A well-functioning audit function is a key component of its regulation. To the best of our knowledge, this paper is the first to examine issues related to banks’ audit quality and audit firm rotation in Libya

Three decades of subsidiary exits: Parent firm financial performance and moderators

This study aimed to find important constructs and relationships among models of subsidiary divestment during the period from 1989 to 2018 using correlation matrices of 80 studies, the selection of which was based on six criteria. It revealed eight important constructs, namely firm innovativeness, environmental factors in the target country, type of experience, organizational characteristics, investment strategy, parent firm financial performance, subsidiary divestment, and the moderating effects of advertising intensity and product diversification. Furthermore, it shed light on seven relationships that should be considered in future attempts to assess parent performance related to its antecedents and subsidiary divestment. Moreover, advertising intensity and product diversification were respectively weakening and strengthening moderators on firm financial performance, and advertising intensity was a weakening moderator between organizational characteristics and subsidiary divestment. The implementation of a product diversification policy did not assist in preventing subsidiary divestment. Conclusions, implications, limitations, and future research are discussed

Onvoldoende uitleg bij toepassing van het ‘comply or explain’- principe in Europa

In dit artikel worden de mate en kwaliteit van de toepassing van het ‘comply or explain’-principe voor beursgenoteerde ondernemingen in Nederland, België, Duitsland, Italië en het Verenigd Koninkrijk onderzocht. Dit is de eerste studie naar de toepassing van het principe waarin simultaan meerdere landen voor opeenvolgende jaren met één en dezelfde meetmethode worden onderzocht. De resultaten laten zien dat ondernemingsgrootte en de tijd van positieve invloed zijn op de mate en kwaliteit van naleving. Op de vraag of het ‘comply or explain’-principe juridisch ingebed dient te worden in de wet of in beursregels kan aan de hand van dit onderzoek geen eenduidig antwoord worden gegeven en dit dient verder te worden onderzocht in samenhang met de culturele kenmerken en het rechtsstelsel van een land. Hoewel de mate van codenaleving hoog is, laat de kwaliteit van de uitleg bij niet-naleving van codebepalingen te wensen over. Verdere finetuning van het ‘comply or explain’-principe is derhalve nodig voor een effectieve en juiste toepassing van het principe

Rotation von Prüfungsgesellschaften - Internationale Bestandsaufnahme und empirische Befunde

Mit ihren Vorschlägen zur Reform der Abschlussprüfung hat die EU-Kommission Ende 2011 Änderungen der gesetzlichen Abschlussprüfung zur Diskussion gestellt, die u.a. die Einführung einer Pflichtrotation für Prüfungsgesellschaften vorsehen. Im internationalen Kontext sind viele Länder auszumachen, die eine Pflichtrotation der Prüfungsgesellschaft kodifiziert haben, aber auch solche, die einen verpflichtenden Gesellschaftswechsel wieder abgeschafft bzw. trotz intensiver Diskussion nicht ratifiziert haben. Dieser Beitrag möchte zum einen die internationalen Erfahrungen mit dem Thema der Pflichtrotation nachzeichnen. Zum anderen sollen Argumente der politischen Diskussion vor dem Hintergrund wissenschaftlicher Erkenntnisse zur Pflichtrotation beleuchtet werden

Mandatory Audit Firm Rotation: A Review of Stakeholder Perspectives and Prior Research

The global financial crisis brought to the fore questions surrounding the scope and quality of the external audit, market concentration and auditor independence. One of the issues currently being considered by the European Commission and European Parliament is mandatory audit firm rotation. The aim of this review is to identify, consider and evaluate stakeholder views and research evidence on mandatory audit firm rotation to highlight deficiencies in the existing research literature, identify opportunities for further research and make recommendations for policy-makers. As demonstrated, stakeholder views vary widely. We find that the research evidence on the impact of mandatory audit firm rotation on audit quality and auditor independence is inconclusive. Whilst there is some evidence that rotation may have a positive impact on 'independence in appearance', most research fails to generalise these findings to measures of audit quality associated with 'independence in fact' and there is even evidence of potentially adverse effects of rotation. Given the lack of evidence associating mandatory audit firm rotation with an improvement on audit quality, regulators need to determine carefully the long-term objectives of a mandatory rotation requirement before implementing a costly measure. We further highlight the need for future research looking at the implications of measures designed to improve audit quality. © 2013 Copyright European Accounting Association

Online_appendix – Supplemental material for Acquirers’ Cultural Background and the Use of Earnouts

<p>Supplemental material, Online_appendix for Acquirers’ Cultural Background and the Use of Earnouts by Corinna Ewelt-Knauer, Johannes Gefken, Thorsten Knauer and David Wiedemann in Journal of Accounting, Auditing & Finance</p

Verplichte roulatie van accountantskantoren: Een benadering vanuit praktisch, empirisch en theoretisch perspectief

Naar aanleiding van de voorstellen van de Europese Commissie heeft de Tweede Kamer in Nederland inmiddels ingestemd met het voorstel dat organisaties van openbaar belang (OOB’s) iedere acht jaar verplicht moeten rouleren van accountantskantoor om zo de onafhankelijkheid van de accountant te waarborgen. Dit artikel behandelt verplichte kantoorroulatie vanuit praktisch, empirisch en theoretisch perspectief, door de belangrijkste opvattingen van de verschillende stakeholders in praktijk te bespreken, een overzicht te geven van onderzoek omtrent de effecten van roulatie en de duur van de controletermijn op de controlekwaliteit, en door op de mogelijke gevolgen voor de marktconcentratie en kosten in te gaan